On May 27th this was one of the names I cut back as it approached a technical resistance area (50 day moving average) right below $58. Not 2 weeks later it is trading in the $49s, so we can get our position back for a 15% price reduction. (and it is down 30% from its peak in early May) That doesn't mean this train stops at $49, and in fact this is one ugly chart - but we are now nearing lows seen in mid March ($48s) so it's as good of a spot as any to begin rebuilding. If things get really hairy around here, we should look to January 2008 lows of low $40s. Today's purchase takes us back to a 1.4% stake; if we get a low $40s price point, I'll be adding in a more material fashion.
We'll continue this identical strategy in other names, as we are finally starting to see pockets in weakness in everything that is not a commodity... I have my list, and I'm checking it twice (ok maybe thrice)
[Feb 28: Ctrip.com Continues to Impress]
[Jan 5: Zachstocks on Ctrip.com]
Long Ctrip.com in fund; no personal position
3 comments:
Hi Mark,
If the subsidies get cut, that should actually help the travel industry for airlines. So perhaps that actually nets out.
Here's an article that also adds a different perspective on the thesis. Note the big numbers on Airline Infrastructure building in China. That would surely bring costs down, and reach more consumers.
http://www.economist.com/finance/displaystory.cfm?story_id=11488749
Thanks, I wasnt thinking of the airlines
I was thinking about the over taxed consumers who would now be facing larger energy (maybe even food) costs - I will be very interested to see how far China is willing to go (if at all) - social unrest is a major issue and their trade surplus is so extreme perhaps they can foot the bill.
Also could see a good scenario for oil to return to $100-$110 so maybe it will be a moot point.
We shall see.
Given the rioting in more 'calm' parts of the world, I'd suspect that they may not cut the subsidies all that much. But I'm hoping the scare, sends stocks down. I haven't heard much of the 'post olympic cut' theory out there in the media yet, so there is still that potential catalyst. Even so, I think a cut in the subsidies will be offset by more people having cars, and just using more oil as they transition into the middle class. So, such a pullback may be rather quick. But right now, today, it does seem to be the perfect storm for high oil prices.
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